Financial economics

Reforming Healthcare - Is implementing social health insurance the answer?

Gain First Hand Knowledge On The Current Implementation Status And Future Of Social Health Insurance. The conference will be held at the Glenhove Conferencing, Houghton, Johannesburg.

Fewer medical scheme beneficiaries

There are fewer beneficiaries of medical schemes than a year ago, according to the latest annual report from the Council for Medical Schemes. The report, which puts into perspective the state of the industry for the financial year 2002, also said the total gross contribution income for all medical schemes increased 16.6% from 2001 to R43-billion in 2002. The number of principal members edged up 0.97%, but this comes along with a 1.8% decline in the number of dependants. The average solvency margins increased to 23.1%, higher than the required phasing-in level set at 17.5% for 2002. High solvency margins are intended to protect members and ensure coverage. The report says this represents a concerted effort to improve the financial soundness of medical schemes. Administration costs rose 15.7% from the previous year to R4.1-billion. These were far higher in restricted schemes, which rose 23.9% to R899-million, compared with open schemes, which rose 14.3% to R3.2-billion. Managed-care costs went down from R986-million in 2001 to R966-million in 2002. Fees paid to healthcare brokers rose 22.5% to R354-million, which the council attributes to members moving from scheme to scheme. New regulations on brokers came into effect at the beginning of 2003, and we are optimistic that this situation will be reversed, the report said. New legislation has reduced the rampant losses attributable to inappropriate reinsurance, said the report. Overall reinsurance losses were R297-million during the year, down 11% from 2001. It is believed that out of 50 applications for reinsurance from the registrar of medical schemes, none has been approved. Riding says there are instances where reinsurance is justified, especially for small schemes. Contributions rose 17.9% in 2002, while claims per beneficiary increased by 15.9%. Medical schemes continued to show a surplus from operations. Operating surpluses increased to R1.1-billion, the second successive year schemes enjoyed operating profits. (Source: The Business Times, 14 September 2003). Full report:

EU fails to commit 1 billion euros to Global Fund

Despite, pressure from the United Kingdom, France and President Bush, EU leaders failed to commit to donating €1 billion euros to the Global Fund to Fight AIDS, TB and Malaria at last weekend's EU Summit in Greece, agreeing instead `to make a substantial contribution`. The formula was agreed because Germany, the Netherlands and several other smaller states said that they could not afford to give more support because of ongoing budgetary problems. The final declaration from the European heads of government stated that the European Council “calls upon each Member State and the Commission to make a substantial contribution, on a long-term basis, to the financing of the Fund.” The final amount to be given this year will not be decided until a meeting of Global Fund donors in Paris next month. A spokesman for the European Commission told EU Business that the Commission was disappointed that some heads of government had felt unable to commit to the target, and it would work to maximise the EU contribution. The 1 billion euro contribution target was set as a result of a US stipulation that any US donation should not comprise more than one-third of the Global Fund’s annual donations. However, last week’s proposals from Congressional Republicans on how much should be allocated to foreign aid (including the Global Fund) leave significant doubts as to whether the US will be able either to increase its support for the Fund or to make a long-term commitment. At the moment, the Global Fund is still far short of the funds its needs. The Fund says it needs $3 billion by the end of 2004. At present only 23% of the Global Fund's projectedis available. (Source: 24 June, 2003).

Adoption of bill ends long dispute about health brokers

Financial Services Board and Council for Medical Schemes finally agree Health brokers will be required to submit to dual regulation in terms of an agreement between the Financial Services Board (FSB) and the Council for Medical Schemes. The agreement ends the long dispute about whether health brokers will be incorporated under the Financial Advisory and Intermediary Services Bill that aims to protect consumers in the financial services sector. Parliament’s finance committee finally adopted the bill yesterday after a long delay, though complex subordinate regulations that contain the heart of the proposed new legislation are still being finalised. An impasse over the position of health brokers led to a stinging rebuke of the finance committee late last year by Health Minister Manto Tshabalala-Msimang who insisted that they remain under the jurisdiction of the council. This was so that the council could control their conduct relative to medical schemes and in meeting health policy goals. The FSB, on the other hand, argued that as health brokers sold other types of insurance besides health insurance, they should meet the same requirements imposed on other financial service intermediaries. Health brokers supported the FSB, saying that compliance with a dual regulatory regime made no regulatory sense but the council was insistent. It was only after agreement was reached at ministerial level that the deadlock was broken. The FSB said yesterday that health brokers would fall under the bill in terms of their market conduct, but would still have to be licensed and accredited by the council under the Medical Schemes Act. The criteria for accreditation under the act would have to correspond with the criteria prescribed in the bill. A broker losing his licence in terms of the bill would automatically lose his or her accreditation under the act. The agreement, the FSB said, was sensible in that health brokers would like intermediaries in the insurance sector and investment managers to be subject to the common framework provided by the bill, thereby establishing an integrated approach to market conduct regulation. It has resolved an impasse which has unfortunately delayed the progression of this very important bill, the FSB said. Another contentious area is the interaction between the bill and policyholder protection rules, which will be dealt with by means of ministerial notice. The notice will exempt financial service providers or their representatives from compliance with those provisions of the rules dealt with in the notice. The FSB has rejected concerns of the Life Offices Association that this will result in dual regulation, uneven playing fields and uncertainty. The bill has been a long time in coming and was the subject of lengthy parliamentary hearings towards the end of last year. Democratic Alliance finance spokeswoman Raenette Taljaard welcomed the adoption of the bill that she said was critical for consumer protection. However, she stressed the need for a balance to be struck between consumer protection and the regulation of the industry. Taljaard said she was worried that much of the regulation would be beyond Parliament's scope to amend. (Source: Business Day, 14 June 2002)

No health insurance for 84% in SA

The fact that 84% of the population is not covered by medical aid or health insurance, indicates the importance of the public sector health services. This is according to the National Treasury's Intergovernmental Fiscal Review. The National Health Accounts Projects reports that in 1999, less than 20 % of the population was covered by private institutional financing intermediaries. These include medical schemes - covering 16% of the population - health insurance products, and workplaces' health services provided by private firms. However, according to the Review, as many as 30% of non-scheme members may use private services on a direct payment basis. Another indicator is the number of private sector hospital beds compared with the public sector. Private hospital beds increased from 16 415 to 24 537 in 2000. Public sector hospitals have over 110 000 beds. Private healthcare expenditure increased at a rate double that of inflation between 19960 and 1998, from R24,7-billion to R33,3-billion. There have also been steep rises in medical aid rates, as gross contributions per member increased by 20,1 % in 1997 and 12,9% in 1998. By 1999, only 16,4% of the population belonged to medical AIDS, leaving a bigger proportion of the population to rely on the public sector. (Source : The Star, 17 October 2001)

Insurers blast new medical law

The Medical Schemes Act Amendment Bill will drive up the costs of belonging to a medical scheme and deny you the opportunity of buying health insurance to supplement your medical cover, the insurance industry says. Both the long-term and the short-term insurance industries this week spelt out a number of serious repercussions for consumers if the latest round of medical legislation is implemented. Gerhard Joubert, the executive director of the Life Offices Association (LOA), says the cost of healthcare is increasing at an alarming rate for South African consumers. He says there is no doubt that the Medical Schemes Act and its regulations are the main culprits. Costs to members will continue to increase if schemes cannot prevent opportunistic scheme-hopping, impose exclusions for known pre-existing illnesses, and charge more if people join schemes only when they are already sick. If costs continue to increase, healthy people are going to opt out of medical schemes because they will not be getting value for money. The insurance industry's chief concern is that health insurance could be outlawed if the amendments are accepted. Caroline da Silva, an executive of the South African Insurance Association - which represents the short-term insurance industry - says medical schemes cannot provide for all the financial losses that you could face as a result of sickness or injury. Yet the proposed amendments stipulate that you may not buy additional cover for medical costs via health insurance. The need to keep membership affordable has resulted in many schemes cutting their benefits to retain their members. This has meant that comprehensive benefits - for example, the loss of income after an accident - are only available through supplementary cover. Da Silva says the hospital cover of millions of policyholders would become illegal if the Medical Schemes Act Amendment Bill was signed into law, as would travel insurance policies, which provide for emergency healthcare and ambulance services to travellers outside South Africa. Hospital policyholders include many old people and people who will never be medical scheme members because of their low income levels. The net effect is that the best schemes would cost more, because they offer the best benefits. These schemes would be the most attractive to members, who would inevitably claim more than they pay. To counter this, schemes would either have to increase premiums or decrease benefits, which is exactly the opposite of what the legislation sets out to achieve. (Source: Personal Finance, 4 August 2001)

Escalating costs can't be blamed on legislation

The Medical Schemes Act and its regulations are not the cost drivers of medical schemes, even though the legislation has been made the scapegoat, Patrick Masobe, the chief executive of the Council for Medical Schemes and the Medical Schemes Registrar, says. Escalating costs: The Medical Schemes Act of 1998 came into effect after a 10-year period of deregulation. During this period contribution levels escalated and dubious practices - such as basing contributions on members' risks - became rife. To single out the Act as the driver behind the high costs is to take a narrow view, Masobe says, as it conveniently chooses to ignore the cumulative years of a deregulated environment and its effects on the present scenario. Prior to the Act, schemes were never given an incentive to contain medical costs or to manage the health of their members. They were run more to benefit particular entities, and the interests of members were not paramount. Health insurance: Masobe says the council's position on the different roles of the medical scheme business and that of health insurance, as agreed with the Financial Services Board, remains unchanged. The council believes that the published amendment is consistent with that agreement. Reinsurance: The council is determined to stick to its guns on the need to examine medical schemes' reinsurance contracts. Reinsurance contracts have been abused to the detriment of many medical schemes and their members. It is also important to highlight that the council is not against reinsurance and will allow it in many cases. (Source: Personal Finance, 4 August 2001)

Medical abuses: state gets tough

The Department of Health is tightening up on the controversial Medical Schemes Act. Although new draft legislation aims at giving medical scheme members greater protection against some of the excesses taking place in the industry, it may also result in higher costs for consumers. The main points of the draft legislation include: * Greater control of re-insurance following claims by the Council for Medical Schemes last year that re-insurance is being abused to generate extra profits for medical fund administrators, to the financial detriment of scheme members; * Changes to waiting periods before claims can be submitted when joining a new scheme; * Prohibiting discrimination on the grounds of age; * Increasing the powers of the Council for Medical Schemes, so that it can act against abuses; * Ensuring that the trustees, principal officers and auditors of medical schemes are truly independent; and * Placing greater controls on the commissions/fees paid to brokers. However, medical scheme administrators say the real impact of the bill is unknown because many of the issues it addresses will only be clarified when new regulations, which are subordinate to the legislation, are published. The draft legislation also removes the conditions that if you don't have two years' continuous membership of another scheme and don't join a new scheme within three months, waiting periods on claims can be applied by a scheme. It seems that conditions for waiting periods will now be set out in the regulations. The practice of making law by regulation is increasingly causing concern in the medical schemes industry, because it creates uncertainty, administrators say. The proposed measures include a requirement for independent evaluations of any re-insurance schemes and approval by the Registrar of Medical Schemes. On the controversial issue of commissions/fees to brokers, the draft legislation states that all commission and fees will have to be paid in terms of yet-to-be-published regulations and that any other incentives will be banned. The draft legislation clarifies what constitutes a medical scheme and an insurance policy, such as a hospital plan. The indications are that anything that remotely resembles a medical scheme will be subject to the legislation, as will such issues as access, where discrimination on such grounds as health and age is prohibited. Currently, insurance schemes can reject anyone who they feel is too great a risk. (Source: Personal Finance, 9 June 2001)

Fedsure prunes hybrids

Fedsure Health will remove the controversial insurance component from its hybrid medical aid products that created controversy and spurred the demarcation debate between medical schemes and healthcare insurers, it said on 16/8.